The following is a rush transcript of the December 25, 2011, edition of "Fox News Sunday With Chris Wallace." This copy may not be in its final form and may be updated.

CHRIS WALLACE, HOST: I'm Chris Wallace. It is Christmas day. A day of family and faith -- and this year, for politics.

There is no clear front runner in Iowa. Which Republican candidate will make a late move in the final nine days before the caucuses? We'll ask Mike Huckabee who won there last time to handicap the race.

Then, the meaning of Christmas. With the economy struggling and international threats, are there answers in our faith? We'll ask Cardinal Donald Wuerl, the archbishop of Washington.

Plus, 2011 is now in the rearview mirror. We'll ask our Sunday panel to look ahead to politics, the economy, entertainment and sports in 2012.

And our power player of the week gives new meaning to giving.

All right now on "Fox News Sunday."

Hello, again. And merry Christmas from Fox News in Washington.

Well, there are now just nine days until the Iowa caucus and first real votes in the 2012 Republican race. There are six lead chances there -- and here's the latest average from RealClearPolitics.com. Ron Paul now leads the field with Mitt Romney and Newt Gingrich within striking distance. Rick Perry is in fourth place, ahead of Bachmann, Santorum and Huntsman.

With the race still unsettled, we thought we would turn to the man who pulled a big upset in Iowa four years ago. Former Governor Mike Huckabee now host of his own show on FOX News Channel joins us from Little Rock.

And, Governor, merry Christmas and welcome back to "Fox News Sunday."

FORMER GOV. MIKE HUCKABEE, R-ARK.: Thank you very much, Chris. Merry Christmas to you as well

WALLACE: All right. Handicap the race for us. Tell us who you think the front runner is right now? Who do you think is fading? Who do you think is coming on?

HUCKABEE: Well, Ron Paul has an exceptional organization there. And it very well could be that he could end up winning because of the extraordinary devotion of his followers. And I often said, Chris, he's got people that would walk over broken glass for him and they'd break the glass just to be able to say they did it.

So, watch out for Ron Paul.

But here's the other one -- Mitt Romney could win the Iowa caucus if the vote splinters among a lot of the conservatives who haven't yet made up their mind. The third surprise, Rick Santorum I believe is being greatly underestimated in this race. I believe he will be the surprise candidate not necessarily to win it, but to be in the top three or four when people don't expect him to be.

WALLACE: All right. If you had to pick a winner right now and I know we are nine days out, who would it be?

HUCKABEE: I would probably say that Mitt Romney will end up winning it today. Now, I think, again, Ron Paul, because of his organization -- that is where Mitt is at a disadvantage. He doesn't have the devotion.

If the weather is good, Mitt Romney is in better shape. If the weather is bad and it's real tough to get out, Ron Paul would win.

WALLACE: That is really interesting.

All right. You've given us a lot to chew on. Let's break it down a little bit.

You have said today and you've said for some period of time, you'd think that Rick Santorum is going to surprise people, even if he doesn't win, that he's going to outperform expectations. He had a couple of big endorsements from evangelical leaders this week.

On the other hand, I want to put up a poll which may sort of contradict what people's perceptions are. The Washington Post asked likely caucus goers what their biggest concern is, 38 percent said economy and jobs, 28 percent the federal deficit, 15 percent social issues.

In these tough times are social issues less important to Iowa voters than they have been in the past?

HUCKABEE: Well, they may not be front and center, Chris, but they are still important. You take a real strong pro-life voter, they may still be focused on jobs and the economy. But a deal killer for them is someone who is squishy on the issue of sanctity of life. That's important and it's a nonnegotiable.

So, while they are going to vote maybe their pocketbooks, they are not going to step over their pocket and vote against their core principles when it comes to the issue of life and marriage and others. And that's why some of these endorsements that Santorum has are pretty significant.

WALLACE: One name that we haven't mentioned so far is Newt Gingrich who a week or so ago was the front runner in the Iowa polls. He has been hit. When I was out in Iowa for the Sioux City debate, you couldn't turn on the TV and failed to see a negative ad bashing Newt Gingrich as a Washington insider, a serial hypocrisy, and he has in the last week fading a bit in the polls.

The conventional wisdom, Governor, has been negative ads backfire in Iowa. Not this time?

HUCKABEE: Well, not this time, not any time. That's pretty nonsense. Everybody likes to say that, especially if you are the object of those ads. So, you say those are going to backfire.

But the truth is, negative ads continually are used because they work. Now, they work over a period of time. They don't work the first day they are out.

And what they do, they cast doubts. It doesn't just change someone's mind immediately. But if you are soft on a candidate, and every day, you get pounded with about 20 messages telling you that the guy you think you might want to vote for has a lot of problems, it's easier to switch horses at that point. That's what's happening in Newt.

I mean, Newt is a good candidate. He's had a great message. But he has been pounded by Ron Paul, Mitt Romney, Rick Perry and pretty much anybody who has 15 cents to buy part of an ad.

WALLACE: Another axiom about Iowa politics is that if organization is all unimportant, identifying your voters, getting them out in a caucus on a snowy, cold January night to a school gymnasium or church basement. But this campaign has been dominated so much by televised debates. Is organization, field ground game less important in Iowa this time?

HUCKABEE: No, it's still very important. Here's why -- in a primary you slip in, you stand in line for maybe 10 minutes, you vote in a secret booth and then you are out. Nobody knows what you did.

When you go to a caucus, you drive out for a cold evening in a drafty school house or church fellowship hall, you are there for two or three hours, maybe longer, and you're going to have to stand up in front of your neighbors, in front of your pastor, your doctor, your kid's teachers. You are going to stand up there and you are going to have to declare "I'm for candidate A." And everybody in neighborhood knows who you stood for.

And then if you have a second choice, you'll have to stand for him.

It puts the pressure on people. So, what you have, you have the serious hardcore, true believers who go out on caucus night. That's why there may only be 110,000 people voting in the caucus rather than half a million that might be in the primary.

But the point is, those hundred thousand represent the hardcore political activists and that's why the polls don't necessarily indicate what's going to happen because polls, you pick up the phone and you say, yes, I kind of like so and so. Caucus you got to drive and stand up and be counted for the candidate. It's a very different kind of atmosphere.

WALLACE: Now, I want to pick up on what you said a little while ago that Mitt Romney could win this, which would be a big surprise because Romney had been downplaying Iowa this time around, after losing, spending so much time and effort and money in 2008. But he's recently campaigning there more. He's got a big ad buy there.

You really think he has a chance?

And let me ask you about that, because if he were to win in Iowa, which I think would be a surprise. And then if he were to go on and win in New Hampshire, where he's expected to win a week later, what does that do to this race?

HUCKABEE: Well, it puts him in the position where he could run the table. If he wins Iowa, which no one expects and then wins New Hampshire, you know, he's on fire. And then he goes to South Carolina and just got an incredibly important endorsement of Nikki Haley, he probably won't win South Carolina. But if he did better than expected and came in top three and then goes to Florida and if he wins there, I think it upon would be hard to play catch up with him at that point.

WALLACE: I mean, obviously, it's not a matter of delegates because you don't even get half the delegates allocated in this time until April.

HUCKABEE: Right.

WALLACE: But I guess it would be a question of money. I mean, an awful lot of these candidates would simply run out of money to contest it, if -- it's a big if you were to win.

HUCKABEE: That's true, Chris. And a lot of candidates after Iowa, if they don't do very well there, their money dries up. It's a sad reality as there is, but they won't have anymore money. So, they're going to limp in New Hampshire and they'll have to crawl to South Carolina. And if they try to stay beyond that, in unless they have a bunch of millions banked away, they're not going to raise anymore.

So, that's where Mitt Romney does have the advantage. And whether -- again, I don't think anyone expects him to win Iowa. So, that would be a shocker. And if he did, the momentum is tough.

And I'll tell you, don't underestimate the power that the press has to create the image of a winner and the momentum. And, you know, I remember four years ago, I was winning primaries all over the place in the South and Midwest, but by that time, the press had pretty well decided that McCain was going to be the nominee. And there came a point which, you know, it was just a very, very uphill mountain to climb and not a whole lot of money to do it.

WALLACE: You ended up, of course, with the second most delegates.

Let's pick up on Ron Paul. If he were to win and he's the front runner now, what does that do to the race? And I'm going to try to drag into a controversy of problem I've gotten in with the Paul. Maybe you know about it -- with the Paul supporters. What would that do to the credibility of Iowa going forward as a place that actually picks presidents, not people with special causes?

HUCKABEE: Well, I think Iowa is not so much a place that picks presidents. But it does pick people who are thrust into the upper tier. That's history. It gives people credibility.

In the case of Ron Paul -- and I know I'm going to get a lot of nasty letters and emails, too -- Ron Paul is not going to be elected president. He's not. His views on foreign policy are so much an anathema to the Republicans, much less to Democrats and what I call middle-of-the-road people, that he has a core of fanatical believers, but they do not represent the mainstream of America.

HUCKABEE: You come around saying, yes, it's OK with me for Iran to have a nuclear weapon. Chris, that's beyond off of the edge to think that it's OK for this government of Iran to have nuclear devices.

And he says, well, Pakistan has them and Israel has them and U.S. and Russia have them. The difference is they have them so they won't use them. Iran wants to get one because they want to use it. There is a big difference. And it's just like -- he doesn't get it.

And so, there's no way that that's going to do anything other than kind of confuse the race. But he's not going to get the nomination. That is for sure.

WALLACE: I just want to say on this Christmas morning, you may send all your e-mails now to Mike Huckabee.

HUCKABEE: Thank you.

WALLACE: Finally, in a couple of minutes we have left, I want to talk a little bit about you. You announced in May that you would not run because your heart was not in it. As you look at this race, which is still so unsettled and it doesn't seem like the Republican base has coalesced around any candidate, you have any second thoughts about deciding not to run?

HUCKABEE: No, I don't, Chris. You know, I look at this race, and a lot of people have come to me, even within the last two weeks and said, hey, it's not too late. It's not too late. And from my point, yes, it is too late.

But the other reason is that when I watched this, Republicans can't decide what they want to be when they grow up. I know they want to beat Obama but in the process of doing it, they want to tear each up so much and savage each other that it's going to be much more difficult to beat Obama.

If I ran, it would be because I wanted to bring some ideas to the race. I realize, that's not going to really be the focus. It's how mean can a person be.

That's not what drives me. What drives me is make America better, not to see if we can tear somebody apart.

And I don't want to savage Barack Obama. I don't have any personal dislike for him. I disagree with his policies. But I respect him as a human being. I think he's a decent, patriot American and that will get in trouble with some people to even say that.

He loves America differently than me, but I don't doubt that he loves America. And I just find that the atmosphere is so toxic and so negative that it's just not something that I'm -- it's not a water I'm ready to jump into right now. Put it that way.

WALLACE: Well, all right. If you're not ready to do it, let's say the race is pretty unsettled even after Florida, at the end of January. You know, somebody won Iowa, another person won in South Carolina and New Hampshire. Is it too late for any serious candidate to get in, for instance, in February, given the fact that the delegate count, the actual winning of delegates is so back loaded at this time?

HUCKABEE: Well, I mean, it's theoretically possible. I mean, I've looked at people who presented me the plan of here's how it could be done. So, can it be done? Yes? Will it be done? It's very doubtful.

I think most people would look at that and say that it's kind of a Kamikaze raid. If they go and do it, you know, they are going to make a lot of people mad who already sign up with one of these candidates. And if they don't do it, they're going to look like a spoiler. And if they got in late and Obama wins, they'll be blamed for it. And I don't think any Republican wants to be the one around that place for the rest of his life.

WALLACE: Governor Huckabee, we want to thank you so much for coming in on this Christmas and talking to us. Thank you, sir, for your analysis. Nobody knows the Iowa politics better than you.

And we want to note, you have narrated a new pro-life movie called "The Gift of Life." Merry Christmas, sir, to you and Janet and all of the Huckabees.

HUCKABEE: Thank you. Merry Christmas, Chris.

WALLACE: Thank you, sir.

Up next, religion and politics. We'll sit down with the archbishop of Washington, Cardinal Donald Wuerl as we continue on Christmas Day.

(COMMERCIAL BREAK)

WALLACE: On this special day, it is an honor to talk with our next guest, Cardinal Donald Wuerl, the archbishop of Washington.

Your eminence, merry Christmas.

CARDINAL DONALD WUERL, ARCHBISHOP OF WASHINGTON: Merry Christmas to you, Chris. Great to be with you.

WALLACE: As people are busy opening their Christmas gifts today, you and the archdiocese had been conducting a campaign you call "Find the Perfect Gift". And as you see up on the screen, you even distributed 10,000 yard signs. What is the perfect gift?

WUERL: The whole idea behind Find the Perfect Gift is simply to remind everyone -- we have already received the great gift, the perfect gift. God has come to us. God has sent us Christ. And a perfect gift is that beautiful message of Jesus, a message of peace, love, a message of faith, a message of hope.

All of that is part of the wonder of Christmas. So, when we are out looking around looking for a perfect give, we already have it. Just go to findtheperfect.org and you can hear all about it.

WALLACE: Do you worry that we lose sight of that with all the emphasis over this season on material gifts?

WUERL: I think that's part of the challenge we face throughout the year. We are blessed in this country. We have so much. God has been so good to us.

But we have to remember that all of the things we accumulate and they are good things, all these things we accumulate are not at the heart of the real meaning of life. And Christmas just tells us stop long enough to look beyond the present moment and beyond material things and see the glory. See the glory of God with us. And signs of it in love and peace and joy -- all of those things that say to us there is more than just life to hold on to.

WALLACE: You have another big project in 2012. You have chosen to lead a conference of bishops in the Vatican in October on what's called the new evangelization spreading the Christian faith. And you have a new book out -- boy, you've been busy -- called "Seek First the Kingdom," which is on this same theme.

Is the Catholic Church at this moment in decline or is it on the rise?

WUERL: I think we have turned a bend and right now, we are seeing so much new energy, the spirit at work in the church. We are seeing that especially among our young adults and there is a whole new reevaluation and re-appreciation of the church, of the message, and I think that's what the new evangelization is all about.

And the pope is encouraging all of us to look around and to share the great gift of faith with people who should be with us who maybe once thought of themselves as our family that has simply drifted away.

WALLACE: You were named a cardinal of the Catholic Church, an enormous honor for you and for this whole diocese last year. There have been reports recently that the pope who is 84 years old is in decline and showing signs of decline. That he's too tired, for instance, to meet with visiting bishops.

First of all, how is the Holy Father's health? And secondly, do you think it's possible, as he raised if his health might decline further, he might voluntarily step down, which hasn't happened since the 1400s? WUERL: Well, when I looked at our Holy Father and I was there a month ago, I am just always so grateful that he has the energy he does. Look at this person who is 84 years old and I see him continuing to go to meeting after meeting, travel all over the world, conduct all the business of the church.

WUERL: So, every once in a while when someone says, boy, he looks tired, I say to myself -- why shouldn't he? He's carrying on all of the work.

When we go to Rome for these meetings, he's there and the work is being done. I think it's, it is a sign of God's grace and the grace of office that he has able to do what he does so well.

WALLACE: 2012 is, of course, an election year. And I'm going to talk about that because that's what we do on Sunday talk shows.

Rick Perry ran an in Iowa recently in which he said that President Obama is conducting, as he put it, a war on religion. And one of the things he talked specifically about is that the president is taking government money, federal money, from Catholic charities that help people who have been involved, who have been the victims of human trafficking because they refuse to provide birth control and abortions.

First of all, what do you think of the administration policy there? And secondly, what do you think of calling that a war on religion?

WUERL: Well, one of the things that our conference of bishop has done in response to some of the regulations and some of the difficulties that our Catholic institution are finding is to calls all of us to reflect again on the importance that in a pluralistic society, the importance of respecting the religious traditions, the religious freedom, the freedom of conscious of everyone.

Our hope is that just as in the history of the church, and the history of our country. The church has been a part of the public effort to meet issues like feeding the hungry and providing care for people in need, the homeless, that we would always be a part of that. And to do that today, we need to be all the more respectful of the freedom of conscience, the freedom of religious expression of every one of us.

WALLACE: So, when if I may press, sir, the administration -- the Obama administration decides to take money away from the Catholic charities because of the fact that they insist, as a matter of conscience, not to provide birth control or abortions, is that, as Rick Perry would say, a war on religion?

WUERL: Well, I think it is right now is something that's under great discussion. It's all being reviewed and certainly the position of the Catholic Church is that no one -- no one should be penalized because of their faith position. No one should be penalized because of their freedom, the free exercise of the conscience.

You know, we served, whether it's in education, Catholic charities, whether it's in relief of migrants, immigrants, whether it is in social service ministry, we serve the people all over this nation. What we don't do is violates the conscience of all us involve.

There are some things we simply won't do, but that should be respected because it's always been respected.

WALLACE: You conducted Newt Gingrich's baptism when he a member -- converted to the Catholic Church. Obviously, some voters, as they try to assess Newt Gingrich's character, look back at his three marriages and what he says about what he calls mistake and his personal search for redemption. How do you suggest that voters weigh Gingrich's life story?

WUERL: Well, since I had the privilege of confirming Newt Gingrich, I really wouldn't be free to talk about his pastoral experience with the church, his relationship with the church. I don't do that with anybody who comes for ministry in the church.

But I think we can all learn a lesson particularly when we get into the world of an election, that I think we want to respect everyone's religious background. There shouldn't be when we're looking at what's the best leader for our country, there shouldn't be some sort of a litmus test what religion do they belong to, what is their religious experience.

I think what we want to do is look at the candidate to see -- does that share the values that I think are important? Is that person present policies that I think advance the common good of our country?

So, I tend not to make any personal judgments upon the faith life of any candidate for public office.

WALLACE: And, briefly, and without making a specific of any person, if someone has sinned in the past, how should we judge that?

WUERL: We are a church of forgiveness because we've all been forgiven. In fact, we pray -- forgive us our trespasses as we forgive those who trespass against us. It's the only petition in the Lord's Prayer that's conditioned.

We ask for everything else and we just expect God is going to give it to us. But when we come to forgiveness, we -- Jesus said to us, be forgiven as you forgive. We all -- we all ask for forgiveness. It's one of the reasons why leading up to this wonderful celebration of Christmas, we had advent as a reminder -- get to church, get the confession, and remind yourself that none of us are perfect.

And when we come to this Christmas Day, we want to be able to bring as our gift, not only faith, hope and love, but a contrite heart. WALLACE: Finally, Cardinal, do you have a Christmas message to our viewers today?

WUERL: I would wish every one of the viewers the peace and the joy that comes with knowing that God is with us. Christmas is all about Christ coming among us and God being with us -- his name, Emmanuel.

And when we realize that, there's a sense of peace and joy, and the recognition each one of us is capable of manifesting that peace and love and joy in our hearts, in our families and this world.

So, my wish is that this would be a truly blessed Christmas of peace and joy and love.

WALLACE: Cardinal, it is a delight to have you with us. Thank you so much for coming. Merry Christmas to you, sir.

WUERL: Merry Christmas. Thank you, Chris.

WALLACE: And happy New Year.

WUERL: Same to you.

WALLACE: Up next, there is no holiday when it comes to the Republicans running hard in Iowa. We'll ask our Sunday group which candidates have the late momentum heading into the caucuses.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIPS)

MITT ROMNEY, PRESIDENTIAL CANDIDATE: We are Americans, and we will not surrender our dreams to the failures of this president.

REP. RON PAUL, PRESIDENTIAL CANDIDATE: We really believe that this day is and will be receptive to the ideas of liberty.

GOV. RICK PERRY, PRESIDENTIAL CANDIDATE: If you all will have my back on January the 3rd at the caucuses, I'll have your back in Washington, D.C., for the next four years.

(END VIDEO CLIPS)

WALLACE: Just a taste of the holiday spirit out on the campaign trail this week.

And it's time now for our Sunday group -- Steve Hayes of The Weekly Standard; Liz Marlantes from The Christian Science Monitor; Susan Ferrechio of The Washington Examiner; and Charles Lane from The Washington Post.

Merry Christmas, all of you.

Have you all been nice, or anybody here been naughty?

I have to say, I came into my office today, and one of my co- workers had left me, literally, a bunch of pieces of coal. So I think it was a joke, but I'm not sure.

(LAUGHTER)

WALLACE: Anyway, Steve, you have spent some time in Iowa recently. What is your sense of the race with nine days to go?

STEPHEN HAYES, THE WEEKLY STANDARD: Well, I think that the talk of the Ron Paul surge, all of the talk about the Ron Paul surge and the support that he has out there, the momentum that he has potentially going into these January 3rd caucuses is real. I think that that's real, I think that the stories about his organization, I think they are all accurate.

And the question to me is whether the news surrounding his newsletters -- he's got these newsletters that had some racist comments and anti-Semitic comments.

WALLACE: We need to say, this is way back in, like, the early '90s.

HAYES: In the '90s, when he was not in office, and --

WALLACE: And he says he didn't write any.

HAYES: He says he didn't write them, but he hasn't yet given really a coherent explanation. He says he has some moral responsibility for the newsletter and their content, but he hasn't really owned them the way that you might expect. He hasn't said who has written these newsletters, he hasn't answered these questions. These are things that he should know and things that he should discuss.

And the question is whether that discussion which has taken place largely inside the beltway makes it out to Iowa during a holiday season in which people may or may not be paying a lot of attention to what's going on leading up to the caucuses.

WALLACE: All right.

Liz, Ron Paul is the story right now, he's the front-runner in the polls. Earlier in the show, Governor Huckabee said that if he had to guess, he would guess that he might well win. If he does, what does that mean for him, what does that mean for the overall GOP race?

LIZ MARLANTES, CHRISTIAN SCIENCE MONITOR: Well, what's the expression right now, if Ron Paul wins Iowa everybody wins? Because essentially they all get to fight another day.

I know this makes Ron Paul's supporters crazy, but Ron Paul is not going to be the Republican nominee. There are too many areas where his views are just not even out of the mainstream of Republican opinion, but anathema to Republican opinion. So it's --

WALLACE: Especially on foreign policy.

MARLANTES: Oh, especially on foreign policy, but also legalization of marijuana. I mean, there's just a whole basket of areas in which he just is not a possible fit for the Republican Party.

And so the real question is, if he wins Iowa, how that kind of changes the calculation for others. And to some extent, I think it almost negates it. Everybody moves on to New Hampshire. Nobody necessarily needs to end their campaign because Ron Paul wins. He's like every candidate's choice. If they're not going to win, that's who they would like to see win instead of them, and particularly for Romney.

I think the Paul campaign is an interesting calculation, because Romney definitely doesn't want to antagonize Paul to the point where Paul could conceivably end up running as a third party. That's what he doesn't want to do.

So he's OK having Paul around. And we haven't seen Romney attack Paul for that reason. I think as long as Paul is the one siphoning some votes away, Romney is perfectly fine with that scenario. And to some extent, even the candidates.

As I said, they know he's not going to be the nominee. So it makes Iowa almost less important.

WALLACE: Susan, let's talk about Mitt Romney, because Mike Huckabee suggested that he could also win, particularly with all of the anti -- the more conservative votes, almost the anti-Romney vote splinter. If Romney were to win, and then goes on to win New Hampshire, is there any stopping him?

SUSAN FERRECHIO, WASHINGTON EXAMINER: Well, if he wins in Iowa -- and he could -- people think he could win, it's very possible -- he has got a double-digit lead in New Hampshire in just about every single poll. So he will take New Hampshire by storm and do very well there, and that's going to really propel him into South Carolina, where he will have problems, because the South has had a harder time embracing Romney. It certainly will help him.

And he's also got to find a way to survive in Florida, where Gingrich, in the last polling, had a double-digit lead. I don't think it's over yet. I still think the southern states are problematic for Romney. Some people are saying he wins Iowa, he wins New Hampshire, it's a cakewalk for him. I don't necessarily think that's the case.

I still think there are people who just aren't willing to fully embrace Romney. If you look at the poll numbers, he's just barely cracking into 30 percent nationally at this point. People don't love him as a candidate yet, and he's still going to have to prove himself a little bit more if he's going to really win this thing.

And he's still looking at this as a long-term gain, that this is something that's going to take months for him to wrap up, to win the number of delegates to win the nomination. So I don't think New Hampshire and Iowa are a guarantee of victory for him.

WALLACE: Charles?

CHARLES LANE, THE WASHINGTON POST: Well, I think one of the amazing things that this all shows that this is the Republican Party might be about to crown the winner of the Iowa caucuses, somebody with the foreign policy views of Jeremiah Wright. Remember that?

I mean, Ron Paul goes around blaming the United States for 9/11, et cetera, et cetera. So it is obvious he's not going to be the nominee. And Liz is right. That's a plus for the others.

I do think you're going to see a couple --

WALLACE: Well, I don't know. Is it a plus -- I mean, if you're Rick Santorum, and you spent two month in Iowa, and you've been to all 99 counties, or you're Michele Bachmann --

LANE: That's what I was just about to say. I think it's a plus for Romney, it's a plus for Gingrich. But some of the other -- more marginal candidates will have to drop out simply because Bachmann staked her whole thing on Iowa, and so did Santorum.

An interesting question was, does Rick Perry carry on after that? Probably, because he's got the money and enough to survive into New Hampshire. But a Ron Paul victory with maybe Romney a second I think is -- really puts Romney in a great position going into New Hampshire.

WALLACE: The name that we've not -- aren't mentioning, Steve, is Newt Gingrich. And two weeks ago, he was the front-runner and Gingrich surged. Can he reverse what appears to be a slide in the polls, particularly in Iowa? And has he made a mistake this week talking so much about process, complaining about negative ads, instead of presenting a positive, affirmative message on things that affect people's lives?

HAYES: Yes, I think he has made a mistake. And I think, to a certain extent, we may have seen his floor. We may be at the floor.

Nobody knows exactly where it is, but he seems to have come down. I mean, in some polls he's basically lost half of what he had at the beginning of this month. So he's certainly fallen. The question is, where is his floor and can he hang on to some of the voters that he had during the times that he was doing so well.

Again, anecdotally, but talking to voters, interviewing dozens of voters in Iowa over the past week, week and a half, I found voters making arguments that suggest they are more deeply invested in Newt Gingrich and his candidacy than I would have thought. So they're talking about things like a charge that he took $1.6 million from Fannie and Freddie. And rather than saying, yes, I'm troubled by that, but I'm going to vote for him anyway, they're saying, well, that's not really that big a deal.

I mean, he was a private citizen, he has to earn money. These are the kinds of things you make if you're committed to voting for Newt Gingrich.

Having said that, we know from poll after poll after poll, that 60-plus percent of Iowa voters are not locked in to their candidate. So what happens over these final eight days or 10 days is really going to make a big difference.

WALLACE: Liz, your thoughts about Gingrich?

MARLANTES: I was going to say, I think what we have seen with Gingrich is the answer to the question as to whether traditional campaign elements really still matter. And the answer is, yes, they do.

Attack ads work. We've seen that now in Iowa. He's just been decimated by the ads, and he has not had the money to run ads of his own in response, either attack ads of his own or ads kind of saying, it's Christmas and why are they all attacking me? He just hasn't been able to respond.

And even organization matters, to that extent. He hasn't had surrogates out there on his behalf, he hasn't had phone banks calling to try to counter some of the attacks. It's really, really hurt him.

I mean, even the NewtGingrich.com thing, the fact that he doesn't own the domain NewtGinrich.com, and this week we found out it's a Democratic group that owns it and they direct it to Freddie Mac or Tiffany's if you type in "NewtGingrich.com," little things like that do matter. And we've seen that with Newt Gingrich.

WALLACE: Well, you know, it's interesting. I asked Mike Huckabee about that, and he said all this talk about Iowa and negative ads don't work. He said bull, the only people who say that are the people who can't afford negative adds.

All right. We have to take a break here.

When we come back, we'll ask our group to dust off their crystal ball and tell us what they think will happen next year in politics, entertainment, the economy and sports. I'll make a prediction right now. Steve Hayes likes the Packers.

(COMMERCIAL BREAK)

WALLACE: 2011 was quite a year from the tragic shooting of Gabby Giffords, to the unfolding of the Arab Spring, to the takedown of Osama bin Laden.

We're back now with the panel to look ahead at what will happen in 2012.

Under the guideline "often in error, but never in doubt," let's tackle the year ahead.

Steve, politics?

HAYES: Are you going to replay these at the end of this year?

WALLACE: Oh, absolutely. We're going to save these and embarrass you.

What happens in 2012 in politics?

HAYES: Well, Republicans have shown that they are very good at making mistakes politically. But having said that, I think it's more likely than not that Republicans win the White House in 2012, win the Senate in 2012, despite some good Democratic recruits, and keep the House of Representatives. So I think we're going into 2013 with an all-Republican government in Washington.

WALLACE: And who will be the Republican president?

HAYES: Probably Mitt Romney.

WALLACE: Liz?

MARLANTES: I am going to disagree. I'm going to say in a year of great volatility, we're going to end up with essentially status quo. I think Obama is going to get reelected. I think the Republicans will keep the House, and I actually think -- I'm going to go out on a limb and say Democrats are going to narrowly, narrowly keep the Senate, because they're going to pick up a seat in Massachusetts and possibly another seat somewhere like Nevada.

WALLACE: Wow, that's interesting, because I think the conventional wisdom is, because the Democrats are facing so many --

MARLANTES: They will lose seats. I think they will lose at least three. But I think it's possible there's actually a path for them to narrowly retain control.

WALLACE: Susan?

FERRECHIO: I agree that there is a path for them to retain control, but they won't retain control. I think Republicans will squeak by and they'll be running the Senate. We'll have an all- Republican Congress.

However, I think Obama will stay in the White House, and the reason being, the economy is recovering. It's recovering very slowly. I know people think this latest bump is just not going to last, but it's trending up. And I think Obama is the ultimate campaigner.

No one -- in this array of candidates we have on the Republican field, no one can challenge him, really, as a campaigner, and he's going to get his base out and he's going to get people to vote for him, and the economy is going to be improving. It's all going to work out in his favor, and he will in November, for sure.

WALLACE: And who's the Republican nominee?

FERRECHIO: I think it will be Mitt Romney.

WALLACE: And Charles?

LANE: Well, I'm not going to predict who will win, but I am going to predict that whoever does win will win with the electoral college majority, but not a popular vote majority. I think we're going to have one of those years because it's going to be so closely run and because both candidates are going to focus so intensely on swing states, they'll kind of leave the voters everywhere else less interested.

WALLACE: So a repeat of 2000 with Bush winning the electoral college but Gore winning --

LANE: Right. And note my scenario includes the possibility of a third party, because then you could have the first place finisher not getting the majority either.

HAYES: But no names? I mean, come on. That is so weak.

LANE: I know the names. I just can't say.

(LAUGHTER)

WALLACE: He could tell us, but he'd have to kill us.

All right. Entertainment.

Steve?

HAYES: Well, I don't go to movies, I don't listen to modern music. So my prediction is going to be that "Chipwrecked," which is the new Chipmunks movie, is going to win the best picture, because it's the only that I am going to see that caters to people under 8.

WALLACE: Chipmunks is going to win?

HAYES: Best picture.

WALLACE: Really?

HAYES: I'm staking my reputation on it here and now.

WALLACE: Well, let me just say, you will win the Oscar pool. There's no question.

Liz?

MARLANTES: I may be heading to that movie shortly.

I'm going to say that Rooney Mara wins best actress and takes it away from Meryl Streep as "The Iron Lady" for --

(CROSSTALK)

WALLACE: Now, we need to explain, Rooney Mara is playing Lisbeth Salander in --

MARLANTES: "The Girl With the Dragon Tattoo," exactly. And I think --

WALLACE: Have you actually seen this movie?

MARLANTES: I haven't seen it yet, but her performance, from what I hear, is very, very good.

WALLACE: The buzz.

MARLANTES: It's the buzz, exactly.

WALLACE: Susan?

FERRECHIO: I think that it's not going to be the young winner this time. It's going to be Meryl Streep. She's going to win for "The Iron Lady."

She's been nominated 16 times. The last time she won was 30 years ago, so they owe her. This is going to be her year, and I think she'll win for portraying Margaret Thatcher.

(CROSSTALK)

WALLACE: And as you can see, that's her, not Margaret Thatcher, but she plays "The Iron Lady." It is supposed to be -- again, we haven't seen it -- a marvelous performance.

Charles?

LANE: Well, I actually have seen "The Descendants," with George Clooney in the lead, and I'm going to predict that he takes best actor for that. Not just a pretty face. He's a fantastic actor.

WALLACE: Well, I have to say, I saw that, and he was great. And it was also a great movie. But you are all wrong.

This is the one that I am going to get into. The best picture will be a movie which you may not have heard of yet called "The Artist." "The Artist" is a, yes, black and white movie. It is a silent movie. It is absolutely delightful.

Go see it. And it will win best picture. And I will -- because of my pick and not Chipmunks, I will be, Steve, in the Oscar pool.

The economy -- Steve?

HAYES: I think economic growth will be under 2.5 percent every quarter of 2012. I just think there -- even though I think you can look at the economy now and suggest that we're in the beginning stages of a recovery, and that it's ready to explode, you've got too many things.

I'm going to go essentially with what I said for politics, that despite all the volatility, what we're essentially going to see is status quo. I think the unemployment rate is going to stay about where it is, and I think the stock market, we're likely to see a lot of ups and downs this year, but I think it's probably going to end the year about where it is also, still driven by uncertainty in Europe.

WALLACE: Susan?

FERRECHIO: I think the jobless numbers are going to go down, and they're going to go down enough to help the Democrats and help President Obama.

WALLACE: Charles?

LANE: Well, my prediction about the economy is that the big story over the course of the year will be the steady comeback of American manufacturing, spearheaded, perhaps, by foreign companies in the auto sector like Honda, which is moving two plants here. Toyota is going to open up in Mississippi, and Volkswagen just opened up in Tennessee.

Soon the cliche about Michigan being the hub of our car industry will yield to the South being the hub of our car industry.

WALLACE: Will General Motors and Chrysler continue to rebound?

LANE: I think General Motors is looking a little iffy right now, but I do think Chrysler's outlook with some new models is surprisingly good, from what I read.

WALLACE: All right.

Finally, the all-important sports.

Steve, no surprise. Go ahead and say it.

HAYES: Well, I made this prediction at the beginning of the season and I have to stick with it now. I think the Green Bay Packers will repeat as Super Bowl champions.

I hate to say that, because I feel like I'm jinxing them. But I will say that the Green Bay Packers will repeat and Aaron Rodgers will be the NFL MVP.

WALLACE: Let me just say this to you, Steve -- your prediction has absolutely nothing to do with how they're going to do.

HAYES: I sit in different places on the couch.

(CROSSTALK)

WALLACE: Liz?

MARLANTES: I'm going to make a baseball prediction in honor of my 5-year-old and say that the Miami Marlins are going to become a new baseball powerhouse this year, much to the detriment of the Washington Nationals, who will now have to contend with them and the Phillies. And they're going to need that two wildcard rule to make it to have any hope.

WALLACE: And they have a big, new stadium. They've gotten some big free agents.

Susan?

FERRECHIO: I think that the Patriots will win the Super Bowl. Now, they've won their last six games, they're probably going to win their next two games. They're on a real winning streak. And I'm sorry, but I happen to think that they're going to pull it off this year and win the Super Bowl.

WALLACE: Do you think that they're going to win over Steve's Green Bay Packers?

FERRECHIO: I know they're the odds on favor. I know. Yes, it absolutely could happen. I think so.

Sorry.

WALLACE: Charles?

LANE: Sorry to bring a somewhat somber note into this discussion, but my prediction has to do with the clips (ph) of Penn State football. One of the great powerhouses in America is going to go through trauma with the trial of Jerry Sandusky on child abuse charges, civil lawsuits all over the place, the university's own investigation. I think there's going to be a profound rethink, difficulty recruiting of new players, and a dark year of Penn State football.

WALLACE: Do you think we can see more of these kinds of scandals at big-time college?

LANE: I think what we are going to see are more and more college presidents and trustees looking hard at the immunity and the impunity that their football programs have had.

WALLACE: All right. That is a somber note, but it certainly was a huge story in 2011.

Thank you, panel. We will mark all of those, see who did well, who made fools of themselves. We will certainly note all of that.

Thank you. See you next week.

Don't forget to check out "Panel Plus," where our group picks right up with the discussion on our Web site, FoxNewsSunday.com. We'll post the video before noon Eastern Time.

Up next, a special Christmas Day "Power Player of the Week."

(COMMERCIAL BREAK)

WALLACE: It's become a Christmas tradition around here to share the story of how one family found a way to express the true meaning of the holiday season. It's a moving example of generosity and love for our country.

Once again, here's our "Power Player of the Week."

(BEGIN VIDEOTAPE)

MORRILL WORCESTER, FOUNDER, WREATHS ACROSS AMERICA: We wouldn't have the opportunities if it wasn't for the people that fought for us and who gave their lives for us.

WALLACE (voice-over): It's that plainspoken wisdom that has driven Morrill Worcester for years on a mission that has touched America's heart.

Each December, Worcester places wreaths at Arlington National Cemetery, and thousands of volunteers are there to help him.

WORCESTER: I think a lot of people think like I do. They just want to -- you know, they appreciate the veterans and they want to show it.

WALLACE: This story begins back in 1962, when Worcester, then a 12-year-old paper boy from Maine, won a trip to Washington. What impressed him most was Arlington, its beauty and dignity, and those rows and rows of graves.

WORCESTER: Every one represents a life and a family and a story. They're not just tombstones. I mean, those are all people.

WALLACE: Thirty years later, in 1992, Worcester was running his own wreath company in Harrington, Maine. But as Christmas approached, he had a bunch left over.

WORCESTER: These wreaths were real fresh. They were great, just made, and I just didn't want to throw them away.

WALLACE: He thought of Arlington and all those graves. When the cemetery approved, he and a dozen volunteers drove the wreaths down and laid them on the headstones. And so it continued for years, until a few Christmases back when an Air Force sergeant took this picture, which ended up on the Internet.

WORCESTER: It kind of struck a nerve, and people e-mailed it to each other, and it really went around the world.

WALLACE: We were there the next year as he and his workers at the Worcester Wreath Company loaded up 5,265 wreaths. Then they embarked on what Worcester calls the world's longest veteran's parade, a 750-mile journey that at some points attracted more than a hundred vehicles. And when they got to Arlington, so many people wanted to participate.

UNIDENTIFIED MALE: This ceremony you are about to witness is an Army wreath-laying ceremony to be conducted for the Worcester Wreath Company.

WALLACE: For years, Worcester paid for all of this out of his own pocket, and he started Wreaths Across America, sending hundreds to cemeteries and war memorials around the country. But he will need help to reach his new goal.

WORCESTER: I think there are around 2.7 million graves, and that's a tall order to decorate 2.7 million graves, so --

WORCESTER: I'm going to keep doing it for as long as I work, and then I know my family is going to continue. So it will be here for a long time.

(END VIDEOTAPE)

WALLACE: And this year, Morrill Worcester arranged for 325,000 wreaths to be placed at the graves of veterans across the country.

Now this program note. Next Sunday, the first day of 2012, we'll be live at the state capitol in Des Moines to cover the Iowa caucuses. Our guests will include Ron Paul, Michele Bachmann and Rick Perry.

Finally, we want to thank you for watching us each week throughout this busy news year. As we say goodbye to 2011 and look forward to the big political year in 2012, here are the names of all the people who work so hard every week to put this program on the air.

From all of us, Merry Christmas. And we'll see you next "Fox News Sunday."

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